A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. REITs hold various property types, including apartments, senior living, offices, and warehouses. Created in the 1960s to enable smaller investors to participate in large real estate ventures, REITs provide a way to invest in real estate without the responsibilities of property management.

What Defines a REIT?

Under U.S. tax laws, a REIT must primarily invest in real estate and real estate mortgages. REITs offer similar advantages to other equity investments and adhere to specific organizational and operational requirements.

Benefits of REITs

• Diversified Investments: Less risk, as investments are spread across multiple properties.
• Liquidity: REIT shares can be bought and sold more easily than real estate.
• Income Distribution: By law, REITs must distribute at least 90% of taxable income to shareholders.
• Organizational Strength: Managed by boards of directors or trustees, REITs maintain professional oversight and structure.

REIT Investment Terms

• Adjusted Funds from Operations (AFFO): Cash available for distribution after necessary capital expenses.
• Capitalization Rate (Cap Rate): A measure of return calculated by dividing net operating income by the property price.
• Funds from Operations (FFO): A key metric of REIT performance, reflecting net income with adjustments for depreciation and real estate gains.

VTI Growth offers investors access to the full benefits of REIT investing, including income potential, portfolio diversification, and consistent long-term growth.